Getting Crowded Replay

I’m still sorting things out, so here is a post I put up last January on early-stage funding:

While I am still skeptical about the idea of researchers using crowd-funding to fund their projects (which typically need more than tens of thousand of dollars over at least a year to get results), I am very pleased to report that the project I wrote about last month was fully funded by its deadline. As I wrote in “Shameless Plug”, Dr. Michael Polastri, associate professor of chemistry at Northeastern University, is starting a web-based portal for sharing data and ideas among medicinal chemists to accelerate the discovery of new drug candidates for treating the neglected diseases/diseases of poverty. Through a website specifically for crowd-funding science projects called Microryza (Mike’s page is at Collaboration for NTD), he raised a seed fund of $25K- congrats, Mike, and thanks to all who contributed!  [For an update on the project, see NTD Collaboration Project.]

Given the popular crowd-funding buzz, I wondered what is its potential for entrepreneurs starting life science product development companies, especially those developing products for global health?   In my experience, such start-ups need a minimum of a couple hundred thousand dollars for the essentials: completing convincing proof-of-concept studies to leverage into a real fund-raising round and paying the living expenses of the founder or founders, at least one of whom needs to put full time into the venture. While it helps to have a fully-employed spouse, generous and supportive friends and family, and access to grants, loans, and free advising, the founding team has the major task of finding and convincing knowledgeable investors that it has a viable plan to make and sell a product and to create a successful business that will repay investors in excess of competing opportunities. Of course, global health-oriented companies have the added challenge of educating potential investors on their value, not easy since investors prefer business models that have worked for them before. Call me old-fashioned, but I think the best (only) way to tackle this task is in person and not through the ether.

But, as it is said, there may be an app for that. As I learned last May from a FierceBiotechIT article and a Wall Street Journal blog post, there are now two sites set up to sell shares in life sciences start-up companies to qualified investors. Since the SEC rules allowing the sale of equity in companies via internet “portals” are still pending (the SEC draft rules were released last October), these sites are not really crowd-funding but require potential investors to register and assert they are “accredited investors” under the existing SEC rules for stock offers. The one is Healthfundr, which “makes it easy to discover, screen, and invest in the most promising health companies.” I could not find any information on how successful this group been in raising money for itself or others, but in a December blog post one of its founders stated that they have now figured out their business model they are starting to execute (Schantzen post), not a reassuring comment. More promising effort seems to be VentureHealth since the founders are successful investors who will be evidently also co-investing. The company’s launch press release indicated that it is aimed at angel investors and companies seeking an alternative to VC funding. It also noted the successful raising of $875,000 for multi-million Series B round for Channel Medsystems, a California medtech company, which is nice, if unfulfilling. The WJS article also mentioned a third site, Medstartr (I guess dropping the “e” is required for crowd-funding sites). As far as I could tell, the site has almost only projects (companies?) developing health care IT products, seeking small amounts (under $10K), and offering a nice “thank you,” not equity, as a return for “investors.” Medstartr states it provides its users “events, mentors, experts, challenges, partners, packaging, promotion, and optimization services to create a model that maximizes the chances of success for ideas in healthcare” and claims to have raised $250K “online” (less Medstartr’s 5-8% take) and $8 million “offline,” whatever that means.

So it looks to me that for now that crowd-funding offers only small amounts of short-term funding to global-health start-ups, but, when the SEC rules are final and if a investment portal can wrangle angel investors with a philanthropic streak, equity-based crowd-funding may be possible. But then again, I may be wrong. Last month I noted that an organization called the Immunity Project started a donation-type crowd-funding campaign to raise $1 million to advance a vaccine for HIV. Since its founding in 2010, the California-based Project, which describes itself as a “non-profit initiative” (I guess the founders thought “company” has a negative connotation), has identified HIV epitopes used by the rare humans able to control HIV infection (FierceVaccines article), got a $1 million grant from Microsoft, and conducted animal studies (sparse details are at Immunity Project). The Project director, Reid Rubsamen who is also CEO of a medical device company, told the San Francisco Business Times that the goal is to complete the funding this coming summer and have an inhaleable candidate vaccine to test in humans in 2015, while continuing to raise the $25 million he estimates is needed to complete testing and registration (SFBT article). As for manufacturing and distribution, he was quoted: “You pretty much need to be thinking about free distribution because the commercial reality is it’s a multibillion-dollar industry. For HIV, the Mount Everest is if we see some really good results, we can rally people around this to do large-scale manufacturing and distribution.” So crowd-funded manufacturing and distribution, too?

I wish him well, but I’m not sure if $25 million more will be enough. HIV is a challenging vaccine target (see a HealthLine article) and the trials expensive. I saw one estimate of the costs of a Phase III trial as $70 million (another FierceVaccines article). I respectfully suggest the Project’s management raise whatever money is needed to generate proof-of-concept data, develop a rationale for why the Project’s vaccine will succeed where others have failed, and use old-fashioned person-to-person salesmanship to find a corporate partner with the expertise and money to test, register, and sell an affordable vaccine. Crowd-funding may be one way to generate seed money but it may also divert and dilute the founders’ efforts to find people and resources needed for the long-term.

[Update: The Immunity Project team is now posting the results of its in vivo preclinical work at Immunity Project blog which is a great idea and will allow researchers familiar with the science (not me) to offer critiques and improvements.]

Getting Crowded

While I am still skeptical about the idea of researchers using crowd-funding to fund their projects (which typically need more than tens of thousand of dollars over at least a year to get results), I am very pleased to report that the project I wrote about last month was fully funded by its deadline.  As I wrote in “Shameless Plug”, Dr. Michael Polastri, associate professor of chemistry at Northeastern University, is starting a web-based portal for sharing data and ideas among medicinal chemists to accelerate the discovery of new drug candidates for treating the neglected diseases/diseases of poverty.  Through a website specifically for crowd-funding science projects called Microryza (Mike’s page is at Collaboration for NTD), he raised a seed fund of $25K- congrats, Mike, and thanks to all who contributed!

Given the popular crowd-funding buzz, I wondered what is its potential for entrepreneurs starting life science product development companies, especially those developing products for global health?   In my experience, such start-ups need a minimum of a couple hundred thousand dollars for the essentials:  completing convincing proof-of-concept studies to leverage into a real fund-raising round and paying the living expenses of the founder or founders, at least one of whom needs to put full time into the venture.  While it helps to have a fully-employed spouse, generous and supportive friends and family, and access to grants, loans, and free advising, the founding team has the major task of finding and convincing knowledgeable investors that it has a viable plan to make and sell a product and to create a successful business that will repay investors in excess of competing opportunities.  Of course, global health-oriented companies have the added challenge of educating potential investors on their value, not easy since investors prefer business models that have worked for them before.  Call me old-fashioned, but I think the best (only) way to tackle this task is in person and not through the ether.

But, as it is said, there may be an app for that.  As I learned last May from a FierceBiotechIT article and a Wall Street Journal blog post, there are now two sites set up to sell shares in life sciences start-up companies to qualified investors.  Since the SEC rules allowing the sale of equity in companies via internet “portals” are still pending (the SEC draft rules were released last October), these sites are not really crowd-funding but require potential investors to register and assert they are “accredited investors” under the existing SEC rules for stock offers.  The one is Healthfundr, which “makes it easy to discover, screen, and invest in the most promising health companies.”  I could not find any information on how successful this group been in raising money for itself or others, but in a December blog post one of its founders stated that they have now figured out their business model they are starting to execute (Schantzen post), not a reassuring comment.  More promising effort seems to be VentureHealth since the founders are successful investors who will be evidently also co-investing.  The company’s launch press release indicated that it is aimed at angel investors and companies seeking an alternative to VC funding.  It also noted the successful raising of $875,000 for multi-million Series B round for Channel Medsystems, a California medtech company, which is nice, if unfulfilling.  The WJS article also mentioned a third site, Medstartr (I guess dropping the “e” is required for crowd-funding sites).  As far as I could tell, the site has almost only projects (companies?) developing health care IT products, seeking small amounts (under $10K), and offering a nice “thank you,” not equity, as a return for “investors.”  Medstartr states it provides its users “events, mentors, experts, challenges, partners, packaging, promotion, and optimization services to create a model that maximizes the chances of success for ideas in healthcare” and claims to have raised $250K “online” (less Medstartr’s 5-8% take) and $8 million “offline,” whatever that means.

So it looks to me that for now that crowd-funding offers only small amounts of short-term funding to global-health start-ups, but, when the SEC rules are final and if a investment portal can wrangle angel investors with a philanthropic streak, equity-based crowd-funding may be possible.  But then again, I may be wrong.  Last month I noted that an organization called the Immunity Project started a donation-type crowd-funding campaign to raise $1 million to advance a vaccine for HIV.  Since its founding in 2010, the California-based Project, which describes itself as a “non-profit initiative” (I guess the founders thought “company” has a negative connotation), has identified HIV epitopes used by the rare humans able to control HIV infection (FierceVaccines article), got a $1 million grant from Microsoft, and conducted animal studies (sparse details are at Immunity Project).  The Project director, Reid Rubsamen who is also CEO of a medical device company, told the San Francisco Business Times that the goal is to complete the funding this coming summer and have an inhaleable candidate vaccine to test in humans in 2015, while continuing to raise the $25 million he estimates is needed to complete testing and registration (SFBT article).  As for manufacturing and distribution, he was quoted:  “You pretty much need to be thinking about free distribution because the commercial reality is it’s a multibillion-dollar industry.  For HIV, the Mount Everest is if we see some really good results, we can rally people around this to do large-scale manufacturing and distribution.”  So crowd-funded manufacturing and distribution, too?

I wish him well, but I’m not sure if $25 million more will be enough.  HIV is a challenging vaccine target (see a HealthLine article) and the trials expensive.  I saw one estimate of the costs of a Phase III trial as $70 million (another FierceVaccines article).  I respectfully suggest the Project’s management raise whatever money is needed to generate proof-of-concept data, develop a rationale for why the Project’s vaccine will succeed where others have failed, and use old-fashioned person-to-person salesmanship to find a corporate partner with the expertise and money to test, register, and sell an affordable vaccine.  Crowd-funding may be one way to generate seed money but it may also divert and dilute the founders’ efforts to find people and resources needed for the long-term.

WIPO Wipeout?

Recently, I reconnected with a colleague about his project to employ an open innovation model to find candidate compounds for treating neglected diseases (to be the topic of another post) and was reminded of a post I wrote a couple years ago on open innovation.  In “Window Dressing” (November 2011), I wrote somewhat dismissively about WIPO Re:Search, a program initiated by the World Intellectual Property Organization (a division of the United Nations) and several major pharma companies to “share valuable intellectual property (IP) and expertise with the global health research community to promote development of new drugs, vaccines, and diagnostics to treat neglected tropical diseases, malaria, and tuberculosis.”  There has been a fair amount of interest among the not-for-profit side of the global health community in the open innovation drug development model since it allows these groups (e.g., academics and the product development programs or PDPs) to access resources of pharma/biotech companies and possibly leverage them into products for the diseases of the impoverished (for a good summary of open innovation for global health, see the 2011 Results for Development Institute report, “Open Source for Neglected Disease:  Magic Bullet or Mirage?”).  I had several reasons for my lack of enthusiasm for Re:Search:

  • Access to IP is insufficient (and in many cases not needed) for the kind of early-stage product development supported by Re:Search; more important is access to the data and materials underlying the IP;
  • The rights to use the IP without further licensing and possible payment (royalties) are limited to the WHO list of neglected diseases and to the least developed countries as defined by the World Bank, meaning that any resulting products are financially unattractive to subsequent licensees (e.g., Chagas disease is a neglected disease that afflicts millions in Central and South America but commercialization of a new drug will require an additional license) (for details, see Re:Search Guiding Principles);
  • Programs of this type have bureaucracies that stifle rather than encourage collaboration and innovation; and
  • Databases are only useful if they are extensively populated, and companies need to put effort into contributing to the Re:Search database and responding to requests.

My take was that Re:Search may be a good first step in encouraging early stage product development for neglected diseases but it does not address the major needs:  positive feedback or incentives to coordinate efforts to generate product prototypes that are likely to be successful (or even advance to the next step) and attracting investors with risk capital and companies with the expertise and interest in bringing those prototypic products into commerce.

Since my colleague spoke highly of his experience in finding collaborators through Re:Search, I thought a revisit was in order and evaluated the program’s performance on four factors over the past two years.

Number and quality of items in the database:  the database (at Database Search) has 247 items in it, up from 140 when it was initiated, so not quite doubled.  Of these, 92 are listed as being IP, and therefore not so useful in my mind, and 56 are listed as Preclinical Candidates.  Most of the items in the latter category are drug or vaccine candidates that emerged from one or two disease-relevant in vitro screens and therefore are likely to have no in vivo data, e.g., on toxicity or metabolism.  A few items seem to be mis-categorized methods.  I also looked at the Marketed Products and Other Type of Data or Services categories.  The first was not interesting, comprising six Sanofi drugs for which one could obtain samples.  The second was much more interesting, a list of 49 institutions and companies offering their drug discovery services, like screening, pharmacokinetics, medicinal chemistry, and biomarkers.  There were also plugs for NIH’s Clinical Testing Center and a Department of Defense biomanufacturing RFP.  The descriptions of the services did not include key details, like cost (I am assuming the cost will be less than that charged by a commercial service), and to get more information, one needs to contact the Partnership Hub run by BIO Ventures for Global Health (BVGH), which may be OK, if BVGH is responsive and helpful.

Number of collaborations with materials and/or data transfer and/or funding:  the Re:Search site has a list of completed agreements (at Agreement List), 37 of which are for collaborations.  I think the most important are those transferring compounds with data, since they are most likely to facilitate drug discovery, and found nine from company to academic institution, two company to company, and one academic to company.  The number of transfers without data from company to academic were nine, and there were five company to academic transfers of know-how.  This is substantial progress, although, of the total, most were made between about one-quarter of the more than 45 participating organizations.  It would be interesting to know if the number of collaborations was increasing, if the parties obtained what they asked for, and what the time from agreement initiation to completion was.

Number of licenses:  as far as I can tell, there have been no licenses completed for the development of products, one of the important goals of the program.  Of course, product development is a multi-year process and my guess is that institutions receiving materials and/or data are not thinking about getting to a candidate product.  The base licensing terms are already set and the licensors supposedly willing, so I see no reason (except effort) not to execute a license; better to do so before generating data that may show value.  Bottom line is that this part of the program is untested.

Buzz generation:  my quick web search found very little news about Re:Search and almost no comments from the professional non-profit global health community.  I did find two articles on the program: a 2012 article in Nature Reviews Drug Discovery (Frantz 2012) and a 2013 article in Pharmaceutical Patent Analyst (Dent et al. 2013).   The latter was written by the BVGH Partnership Hub managers, and they wrote that their role is to “proactively facilitate” collaborations; however, it seems to me they are responding to requests.  If the service is proactive, a more concerted advertising effort among drug discovery researchers, academic and corporate, is needed to attract users.

Overall, I have upped my grade of Re:Search from a C- to a B and am hoping for significant growth in the next year and not expecting a wipe out (or a slow motion crash).

Better than Expected

Back in June, I wrote about GlaxoSmithKline’s (GSK’s) Discovery Partnerships with Academia program (DPAc) and its “competition” for participation called Discovery Fast Track (“The Good, the Bad, and the Ugly”).   In the latter, academic researchers were invited to submit a therapeutic hypothesis with supporting data that was to be judged by a panel of GSK scientists on several factors, including the potential for addressing an unmet medical need (Discovery Fast Track).  GSK would then use the researcher’s assays and its compound library and screening platforms to identify active compounds, and, if there were success, set up a funded, multi-year DPAc collaboration with the aim of generating a clinical candidate that GSK would develop.  GSK has been running DPAc for about three years and had collaborations with a number of university research groups (e.g., in the UK with the universities in Cambridge on alpha-1 antitrypsin deficiency and Edinburgh on severe acute pancreatitis and in the US with Vanderbilt on obesity and Fred Hutchinson Cancer Research Center on muscular dystrophy).  The Fast Track approach was aimed at expanding the program in the US and finding researchers who may have data leading to new mechanisms of action for drugs.  I opined that the program may also fund drug discovery for diseases of the rest of the world (and typically ignored by big pharma) and wished them well.

That was the good.  The ugly I mentioned was that at least one university’s administration (at UCLA) had taken umbrage at the program’s perceived lack of safeguards for university IP and had advised its researchers not to apply.  I noted the concern was unfounded and that GSK had modified the program to get the buy-in of university tech transfer offices.  Fortunately, many universities did not share UCLA’s concern, and, as was announced last week by GSK, the company evaluated 142 entries from 70 universities, academic research institutions, and hospitals that addressed 17 therapeutic areas (FierceBiotech article and GSK press release).  Eight projects were chosen, and I was pleased to note that five may result in therapies for diseases and conditions occurring partly or predominately in low- and middle-income countries (for a reason not given, the group at Harvard declined having its project described).  The projects are:

  • anti-microbial agents, Sarah Ades, Pennsylvania State University;
  • drugs for malaria, Myles Akabas, Yeshiva University;
  • treatments for leishmaniasis (a parasitic disease afflicting about 500,000 persons per year with a 10% mortality rate, Lauren Brown and Scott Schaus, Boston University, and Jim McKerrow, University of California, San Francisco;
  • antibiotics to overcome resistance, Rahul Kohli, University of Pennsylvania; and
  • regulation of male fertility for contraception, Deborah O’Brien, University of North Carolina at Chapel Hill.

The press release also noted that work on the projects will begin immediately and the first screens are expected to be completed in mid-2014, meaning to me that the preclinical phase may start in 2015 and resulting clinical candidates may show up by 2018.

Of course, it would be great if GSK decided to expand DPAc by adding a component that created start-up companies to further develop the academic research it finds, for example, projects that had advanced beyond the screening stage and/or had candidate compounds in hand.  And it would be great if GSK did this for global health start-ups and greater (for me) if GSK did so in the Boston area.  Connecting of a few dots suggested to me that GSK may be headed in this direction.  GSK is definitively putting major money into starting companies out of academia.  At BIO 2013 in May, GSK and Avalon Ventures announced they were creating an investment fund with up to $465 million from GSK and $30 million from Avalon to start perhaps ten companies over three years in the San Diego area but based on technology from “anywhere” (Xconomy article).  It was reported that the GSK spokesperson, Lon Cardon, senior vice president for alternative discovery and development, said that the new fund is modeled in part on DPAc (Global University Investing article).  Apparently, GSK will have offices in San Diego and Boston (actually Kendall Square in Cambridge) to “help manage current external relationships and collaborations as well as identify and review new opportunities,” according to a GSK blog post last month (More than Medicine blog).  Although the post provided few details of the Cambridge office, I found a position listing GSK put up in February for a “DPAc Entrepreneur in Residence – Biology,” who would be “a member of the Alternative Discovery and Development (ADD) Boston Incubator, a new collaborative pilot organization in Cambridge, MA” (Jobing.com posting).  One of the responsibilities of the new hire was “the creation of an exit strategy for the program [e.g., a DPAc project] to either transition into GSK or spin out into an independent entity.”  The job listing also indicated that each project would have an external funding of about $3 million (per year?) and an internal funding of $7.5 million, pretty substantial amounts.  So it is not unconceivable that, if the Boston Incubator includes an R&D facility (rather than only an office), global health-oriented projects in local academia, like the new DPAc-affiliated work at Boston University, could transition to it and eventually spin out as new ventures.  Cool.

 

Halloweenie

Those of you familiar with the jargon of drug development know the phrase, “Valley of Death,” used to describe the transition a candidate drug faces between its preclinical and clinical stages.  The gist is that many wanna-be drugs vanish in the valley after promising studies in animals but before proof-of-concept studies in human demonstrate a possibility of a therapeutic effect.  Cause of death is lack of funding due to the large uncertainty of animal to human extrapolation and the high cost of clinical testing.  For the big pharma companies, it’s a question of allocating resources to internal programs, and their current approach is “fail fast and often” o get their trickle of candidates.  For biotech companies, funding to cross the valley typically comes from a $10-20 million Series B round from current or new investors, or, with good selling skills, finding a big pharma for a “structured deal” (a rare option, see Bruce Booth’s blog) or, with lots of luck and chutzpah, going to the public market (very rare, see FierceBiotech special report).  For companies that have used up their Series A funds or academic groups or not-for-profit orphan drug or global health product development programs (PDPs), the valley looms large.

Last week though, I saw mention of a new program to help companies in the diabetes space cross the valley.  The Juvenile Diabetes Research Foundation (JDRF) and PureTech, a Boston-based venture company, announced the initiation of T1D [Type 1 Diabetes] Innovations, “a novel venture-creating entity designed to accelerate the development of innovative T1D therapies” (JDRF press release).  T1D Innovations is essentially a fund started with $5 million from JDRF that PureTech will manage and use to identify a promising T1D preclinical programs and, after sprucing them up, use as the bases for start-ups.  PureTech will then round up additional funding from “other leading not-for-profit, strategic, and financial investors” (none are named in the press release) to move a company and its therapy through to trials.  The release lacked additional details on T1D Innovations, but Alex Lash writing in In Vivo Blog noted that, to access the JDRF funds, PureTech must raise at least a matching amount with a goal of about $30 million which the principals estimate will allow the funding of 10 companies (In Vivo Blog).

The founding of T1D Innovations is an important step for the JDRF which is a powerhouse in raising money for and funding diabetes research.  JDRF is currently sponsoring $530 million in research including about $25 million granted to 22 companies through its Industry Discovery and Development Partnership program (IDDP), but it has not been an investor in companies.  As for PureTech, the release noted that T1D Innovations is part of the company’s “Valley of Life” initiative, a new program to me.  Web pages for PureTech and the Valley of Life offer general statements (“The Valley of Life is a new funding vehicle dedicated to developing cures by enabling foundations to make mission-driven investments alongside strategic and financial partners ….”) but few specifics, e.g., investment criteria and selection process.  The program apparently started in 2012 with PureTech’s David Steinberg as primary manager.  He provided a quote on the program’s mission in a Nature Biotechnology article: “Our whole idea is to enable new technologies to escape that academic orbit … To close the venture gap, you have to go out and proactively create new companies.” (Weintraub 2012).

PureTech is an early-stage company specialist, calling itself a “venture creation” company rather than a venture capital company, the difference being that it has been willing to put small amounts of money (seed capital in the 100s of thousands of dollars range) into multiple academically-based projects over several years until the technology-to-product path is clear and before bringing in more substantial funding from VCs and other investors.  Over its more than ten years of operation, PureTech has started about 15 companies in a range of areas (pharma, drug delivery, diagnostics, digital, consumer; see PureTech Pipeline), and at least four have attracted wider funding.  According to a 2011 Xconomy interview with CEO, Daphne Zohar, PureTech reviews about 800 academic projects and forms two-four companies each year (Xconomy interview).  PureTech and David Steinberg were also the founders of another unique venture platform, Enlight Biosciences.  At the time of its initiation in 2008, Enlight was focused on founding start-ups developing drug discovery technologies that were to be accessed by its big pharma corporate funders and collaborators, initially Eli Lily, Merck and Pfizer (Xconomy article, Xconomy article).  Enlight has been successful in that it has added five more corporate partners and has spun out five companies (Enlight portfolio), although it has broadened its purview beyond drug discovery to general health technologies, like video games for treating cognitive impairment.

It is too early to tell if PureTech and T1D Innovations will succeed in generating start-ups that can attract additional OPM (other people’s money), but I’m interested in it as a model for engaging foundations in investing in early-stage global health product development companies.  I posted previously on how the Bill & Melinda Gates Foundation may be slowly moving into funding venture funds (“More Not Less”) and how the Gates has been instrumental in starting a mezzanine fund for companies with global health clinical stage products (“Tossed from the Balcony” ).  A “GH Innovations” entity would have the advantage of providing a buffer between foundations and start-up companies and, with the participation of a company like PureTech, would bring in professionals with company formation skills and credibility.  But unlike T1D Innovations, it would have a tough sell convincing investors that there is an exit and ROI at the end of the valley.  GH Innovations could leverage the billion dollars or so the Gates Foundation and other entities have put into research for global health over the past ten years and could increase its chances for success by focusing on products that may have both developed and developing world markets.  Additionally, it could go after investment by the big pharmas that have internal global health/neglected disease programs and believe that start-up/spin-out companies are needed to commercialize products.  Clearly, I need to look at both the investor and the investee sides to see if this skeleton has any legs.  Maybe someone at PureTech has some ideas.

More Not Less

Last week, multiple sources reported that Bob More, an experienced health care venture capitalist, started this month as the senior advisor for venture investing at the Bill & Melinda Gates Foundation.  Bob (he seems like the kind of guy you’d address by his first name) was  general partner at Frazier Healthcare Partners starting in 2008 following 12 years at Domain Associates, also as a general partner, as noted in the San Francisco Business Times and elsewhere (SFBT article).  As reported by Luke Timmerman, the Seattle-based national biotech editor for Xconomy who follows the Gates Foundation (Xconomy article), Bob had the following to say to his colleagues on his new role:

“My role will be focused on developing and executing a venture-capital initiative to support the goals of the Foundation, focused primarily on diseases that affect the poorest people in the world. … We want to encourage and support entrepreneurs to pursue ideas that will solve these problems. And we want our partners to flourish as businesses. … Entrepreneurs create markets where none existed before. The challenge we face is the ability of many people to pay for products and services. But that is often a challenge for which we are willing to bear responsibility for finding solutions. … And I am here because I believe that entrepreneurs can solve these challenges. My task, simply, is to focus the efforts of great entrepreneurs to achieve these goals.”

Luke also provided a list of the companies the Gates has invested in (the Gates does not):

Company Total Invested Date(s) of Investment
Atreca $6 million 2012
Genocea Biosciences Part of $30 million 2012
Liquidia Technologies $10 million 2011
Visterra Part of $13 million 2012

As some readers may remember, I have been posting on the Gates Foundation’s potential to make investments (rather than grants) in companies developing products with global health applications and criticizing the few investments that it has made.  Actually it looks like I’ve posted once each year since 2010, starting with “PRIs for Global Health”,” followed by “BMGF Ventures LLP”, “A Toe in the Water”, and “Nothing Ventured” in 2011, 2012, and 2013, respectively.  My general criticisms included:

  • being a participating co-investor rather than leading the charge as a led investor;
  • investing minor amounts of money (as little as one-fifth of what the other investors bring to the table) resulting in little influence;
  • not taking a board of directors seat resulting in very little influence;
  • not vetting the technology for its application to global health nor publicizing the company’s commercialization plan for a global health product;
  • not having an announced investment strategy; and
  • not having a transparent process for submitting business plans relying instead on the Gates old-boy network.

My amateur’s advice to the Gates investment team on stuff they need to do was:

  • do thorough technical, competitive, and risk assessments (to be sure the Foundation is not being scammed);
  • figure out how to work with the other investors with whom it will not be in complete alignment (the Foundation will measure its return on investment in both monetary and non-monetary terms);
  • learn how to influence the company as a later-round (less leverage) and physically distant (less communication) investor;
  • have its board of directors representative understand start-up companies and the biotech/pharma industry;
  • have a clear understanding of how the product will be commercialized and made accessible in both major and rest-of-world markets;
  • have an exit plan if the company or product is acquired;
  • figure out how to track and respond to the progress (or lack of) by the company toward its global health-related objectives; and
  • assure the IRS that its investment is aligned with its charitable mission.

A bit disconcerting was that the Foundation apparently did not feel that Bob More’s appointment was worthy of a press release and that I could not find any information on the Foundation’s “program related investing” on its website as I had before.  So the bottom line is that Bob has his work cut out for him but seems to be up to the challenge.

 

More Toes in the Water

Last week I wrote a post about GlaxoSmithKline’s lead over its fellow multi-national pharma companies (MNPC) in entering the rest-of-world markets where health care is primarily paid for by the patient and her/his family with a bit of help from public (government) and private (NGO) sources (“GSK Splashes Away”).  This seems a rational business strategy to me as “first world” pharma markets become increasingly constrained by the continuing increase in health care costs (of which drug costs are a minor, but visible, part at about 10% of total) and the payers (you, me, our employers, and insurers) expect new drug prices to be justified by superior benefit.  Last week, another MNPC, Takeda Pharmaceutical Company Ltd., ranked about 15th its by annual revenue of $16 billion, followed GSK into the new territory and positioned itself for entry into the global public health market by acquiring the Colorado-based vaccine developer, Inviragen (Joint press release).  Inviragen (Inviragen) may be known to some through Dan Stinchcomb, its co-founder and CEO, who has been a regular speaker and attendee of the past Global Health Partnering Forums and the BIO annual conference’s global health-related sessions (I last saw him at BIO 2012 here in Boston).

Since its founding in 2005, Inviragen has focused on developing global vaccines, that is, those for diseases more common outside the US and Europe.  Its most advanced candidate is DENvax, a dengue fever vaccine that moved into Phase IIb trials earlier this year.  In the pipeline are vaccines for the mosquito-borne diseases, Japanese encephalitis and Chikungunya, and for Hand, Foot, and Mouth disease, a typically non-lethal viral infection endemic throughout the world that can be fatal in children (WHO Fact Sheet).  Inviragen has been funded in part by private equity, raising $15 million from venture firms including Bio*One Capital, a subsidiary of Singapore-based EDB Investments, and by $30 million in US government grants and contracts.  Takeda paid the owners $35 million upfront with an additional $215 million tied to unspecified commercial milestones, a decent but not outstanding deal (a 6x multiple assuming one-fourth of the milestones are paid).   I did not see a mention of Dan’s plans.

The acquisition is a relatively safe move by Takeda in that Inviragen’s vaccines have both first and ROW markets (e.g., it is possible that dengue may be come more prevalent in northern climes due to climate change, see my post, “Climatic Change-Up” ).  The acquisition also fits with Takeda’s new as of last year Vaccine Business Division (the company has a strong domestic vaccine business) which is headquartered in Deerfield, IL, and headed by the former Director of Vaccine Delivery of the Gates Foundation’s Global Health Program, Rajeev Venkayya.  Takeda also purchased another privately-held vaccine company in 2012, Montana-based Ligocyte (Takeda press release ) that has developed-world vaccines in development and proprietary technology for making VLP (virus-like particle) vaccines.  These are refreshingly proactive moves for Takeda, a company in a conservative business and based in a conservative country and having a long tradition to uphold (it was founded in 1781, the same year the Continental army and the French gave the Brits a drubbing at Yorktown).  I got to know the company when I was its liaison at MIT and then at Boston Children’s Hospital over 5-6 years in the late 1980s, and it was struggling with innovation then.

Of course, Takeda, like its brethren, is trying to fill its early-stage pipeline with hopefully successful product candidates, and its key person to do so is Tadataka Yamada, Chief Medical and Scientific Officer and a company director who came on board in 2011 after leaving his position as president of Global Health Program at the Gates Foundation (is also a former Chairman for R and D at GlaxoSmithKline).  In a recent interview, Dr. Yamada noted his intent to re-energize Takeda’s drug discovery program, acquire new drug candidates by purchasing companies, and tap into emerging science through a New Frontier Science Group (FierceBiotech interview).  This group, according to it head, Gordon Wong, is “to find and support scientists conceiving ground-breaking life science technologies and nurture their translation from concept to reality. We are focused on emerging innovative scientists in academic medical centers, research institutions, incubators and nascent companies around the world.  Our mission is to work closely with innovators and provide guidance, resources and financing to advance their vision from conception through key proof of concept experiments” (Takeda Research Messages).  I have known Gordon from our days at Wyeth but have not yet asked him if the “ground-breaking life science technologies” will include those leading to treatments of the less lucrative diseases.  I know he has a tough job, having been in the technology and product acquisition business where opportunities abound and finding the real and most promising is a challenge.